EU-Russia Trade War

On July 28, the European Union agreed for the first time to impose relatively serious sanctions on Russia in belated response to Moscow’s military meddling in Ukraine – paralleling US bans on new investment in Russia’s crucial petroleum sector by barring exports from the EU of advanced technology that Putin needs for North Shore drilling to extend his petro-charged empire into the future.

Ten days later, however, Russia retaliated by banning imports of all fruits and vegetables from EU countries. Small potatoes, perhaps. But shortly thereafter, China announced plans to start selling fruit and vegetables directly to Russia via a special logistics center in Dongning; and Poland – Europe’s largest producer of apples – promptly asked the US to purchase perishables it would otherwise sell in Russia. (Good lucksky with that!)

If the Russian ban lasts for the initially-announced 1-year period, it could cost EU members $16 billion in lost sales. Germany, the Netherlands and Poland stand to lose the most trade, but neighboring Finland, Lithuania and Latvia may lose larger portions of their respective GDPs. For its part, of course, Russia will probably experience food shortages and inflated prices.

Not all Europeans are cowed by fears of trade war. Hundreds of Poles have rushed to post mocking photos of themselves eating domestic apples, and it’s suggested that Warsaw will be drunk on hard cider by the weekend. The Greek Communist party, purporting to speak for aggrieved farmers, has contributed a further note of levity by accusing Athens of supporting “an imperialist intervention by the US” in Ukraine.

With a trade war now apparently in full swing, it’s fair to ask: “Who will win?” Russia has also targeted imports of food from the US, but those amount to less than one percent of total American agricultural exports. So, from a diplomatic perspective, it appears that the Russian response is well-calibrated in the short run to drive a wedge between the (non-suffering) US and its clearly-suffering allies.

And over the long run? Well, the Greek communists may not speak with the voice of historic inevitability. But if I were to asked to bet which would fold first – Russia’s long-suffering consumers, well-acquainted with empty shelves and ruinous prices, or European parliaments faced with farmers dumping rotten pears on their marble doorsteps – I would need really favorable odds to bet on the Europeans.